For most people, rideshare services are a lifesaver. It has completely changed the way people commute and travel. While it’s no secret how the boom in rideshare services has provided much needed convenient and reliable ways to get around, how has it affected drivers?
As the demand grows for more Uber drivers, more and more people are interested in becoming either full-time or part-time. Whether you’re an interested individual or a long-time driver, it’s essential to understand how taxation would work for you before submitting your application.
Overall, basic tax principles still apply regardless of how much time you spend as an Uber driver. In this article, we’ll be discussing how the Australian Taxation Office works with Uber.
Goods and Services Tax (GST) for Uber Drivers
If you spend less than 20 hours per week or less than six months as an Uber driver, you are considered an Uber driver who is self-employed. This means you are responsible for paying GST tax on all of your income.
The basic principle is that Uber should charge its drivers 10% GST, but it passes that on to its customers. If you do not declare your income as an Uber driver, you cannot claim your GST to be refunded since Uber is responsible for charging you GST tax.
What happens if you earn more than $75,000 as an Uber driver? In this case, you’ll be liable to pay the goods and services tax (GST). Once you reach a certain income level, you’ll have to register for a business number and show your Uber income on your tax return.
The easiest way to handle tax returns is to have a separate bank account to report your Uber income. If your income is less than $75,000, you are considered under Division 7A. This ensures all of your Uber earnings are reported as income.
It is essential to register for GST with the ATO before you begin working with Uber. If you don’t, then the following penalties apply:
- 25% penalty on any unpaid tax
- A further penalty of up to 100% if you knowingly provide false or misleading details
- The ATO will deduct any unpaid tax from any tax debts.
Are You an Employee or Self-employed?
When you’re an Uber driver, you’re considered self-employed by the ATO. This means you have to pay a higher tax rate than the workers who are considered employees. The difference in taxation can be pretty significant. This is because employees have to pay a lower tax threshold.
If you earn at least $75,000 as an Uber driver, or even more, and you’re earning a significant amount of income, you’re considered self-employed and will need to register for a business number with the ATO.
If you earn less than $75,000, but you work for more than 20 hours a week or more than six months, then you’ll be considered self-employed in the eyes of the ATO.
You’re considered an employee when you’re in an employment arrangement in which you’re subject to the control of your employer. However, this is not the case with Uber drivers, as they control when they want to work.
Becoming an Uber driver is fast becoming one of the most popular ways to earn some extra cash. However, it’s important to understand that you will still be subject to tax obligations as stated by the ATO despite taking this job casually. The tax principles still apply for full-time and part-time Uber drivers.
Rideshare Tax is a free app designed for rideshare drivers. Our goal is to guide you through the often complicated and confusing tax requirements for rideshare drivers. We offer free ABN & GST registration. We can also help you manage your BAS on the go. Drive more, worry less. To understand rideshare tax in Australia, download the app today!